The following article explores a couple scenarios experienced with getting paid by clients. I thought this was an interesting topic since when a client dispute results in a non payment this cost ultimately has to get passed on to clients whom are good about making payments on time. I personally do not think this is fair to the "Good Paying Clients". It also increases the amount of overhead and administrative time on collection efforts or fee's from collection agencies. On the same token it is not always fair to the employer/client to be at risk with 100% prepay or large deposits with staged payments against milestones. While we are all about performance and delivery time as good benchmarks for customer satisfaction we felt it was much better to have a balance playing field for both the client and our company.

We first examined the top three factors in the payment process that caused anxiety.

1.     Risk of no payment or non delivery

2.     Scope Creep or Change orders

3.     Cash flow and resource management

The other consideration we had was that since we are a virtual business we often never meet our customer in person. This made it even more important that we have a system that would not make new clients feel uncomfortable dolling out a big chunk of cash on a deposit when we are just getting to know each other. There have been many scammers that justly require you to keep your guards up.

What we decided at CNP Integrations was that the best process is to work very similar to hiring an employee. We are essentially a department here to extend your capabilities and collaborate with your team to achieve the success you desire and express in the project plans we build together.

Simple Process to reduce risk, improve relationship efficiency and maintain cash flow:

• First; We set up a project scope and timeline along with required resources to complete the tasking. In addition we schedule consistent weekly production meetings where we update and review progress.
• Second; Then based on all of these factors we work on a weekly or bi-weekly retainer payment with a burn rate adequate to meet the client's expectations. This can go up or down depending on the client's needs, thus allowing us to respond quickly to our client as they respond to their customers.

This "pay as you go" approach has so far improved our collaboration synergy, gained greater respect for each other's time, given our clients more control and involvement in the development process, it better trains them for self sufficiency and best of all significantly reduces risk for everyone. Granted, it can eventually, after trust is built and a consistent process has been followed over time, be more efficient to work on a net 30 and invoice. However, starting every new customer relationship carefully has been very effective and we have reduced the collections overhead to nearly zero in the past two years across the board on Web development projects. This has allowed us to keep our rates lower as a result and improved our customer retention and loyalty at the same time.

Related articles: 8 Bench Marks of a Great Client New blog posts here daily: www.cnpintegrations.com/myblog/

I look forward to your comments, questions or interesting stories you feel like sharing about payments and terms with your clients. What works best for you and where are your biggest pain points?

CN

What Do You Do When Your Client Won't Pay? Collis Ta'eed http://www.freelanceswitch.com/author/collis/

It's the situation you hate to contemplate, but almost every freelancer will get their share of payment problems. Whether it's delays, bargaining, outright refusal or going incommunicado. So what do you do when a client won't pay? And have you ever been in that situation? Put a vote in the poll and share your experiences in the comments!

My own experiences

Cyan and I encountered a couple of clients who in their varying ways tried to dodge payments. One client who micromanaged us to the point of detailing how many pixels text should be spaced apart, called us up one day to say that they didn't think we'd done any "real design" and they hadn't expected to have to "do the work themselves". Fortunately for me Cyan is in charge of payment situations and calmly explained to a rather heated client that we billed for time not their perception, that our abilities were limited by their own constant direction and that there would be no discounts or revisions to the invoice. We got paid but lost the client (happily).

Another infamous incident involved a largish agency who delayed months and months, all the while Cyan kept phoning regularly and being palmed off to assistants and staff. Then finally one day, long after it was overdue Cyan did get through to the main client who smugly explained that he'd suddenly noticed the invoice and decided to pay it because it was looking a little "long in the tooth". Needless to say, by that time we had long since stopped working with them, though I must say this client despite the payment problems were actually a good group of people who we enjoyed working with, we just didn't enjoy not getting paid!

Finally a third incident occurred when Cyan and I had left for a vacation and asked a fellow freelancer to step in for us. The client who we'd met a few times but not actually worked with yet, wasn't pleased with the new work and refused to pay. We returned from vacation to find ourselves stuck in the middle, ultimately siding with our fellow freelancer who had done the hours and generously offered a discount. The client at one point threatened to "punch him if I ever see him in the street!" Months later Cyan, our fellow freelancer and I were all in a nightclub celebrating a friend's birthday, when we spotted the client across the room. Without mentioning the identity of the client to our friend, we quickly vacated the club before the party became ... erm ... exciting

How about you?

So what have your experiences been? Have you ever had to hire a debt collector? Have you ever wound up bargaining? Do you have a weird story like my ones?

Source: http://www.freelanceswitch.com/money/what-do-you-do-when-your-client-wont-pay/